USD/CAD teases monthly top above 1.2650 amid weak oil prices, risk-off mood

USD/CAD picks up bids to 1.2660, up for the fourth consecutive day amid Thursday’s Asian session. The Loonie pair buyers took a breather around a one-month high during the early session before a pullback in oil prices and firmer US dollar renewed upside momentum.

Despite witnessing a wider than expected draw in the weekly inventory report, published by the US Energy Information Administration (EIA), oil prices dropped to the lowest since May 24, not to forget mentioning that it printed a five-day downtrend. With the drop in the prices of Canada’s key export item, the Canadian dollar (CAD) had to drop, signaling an upside for USD/CAD

While checking catalysts for oil’s weakness, the recently pessimistic demand forecasts and the Delta covid variant could be cited as the key concerns.

The virus woes not only weigh on the oil prices but also favor the US dollar due to its safe-haven allure. While portraying the covid fears, Reuters said, “The United States leads the world in reported COVID-19 cases and deaths. Daily U.S. cases soared from fewer than 10,000 in early July to more than 150,000 in August as the Delta variant took hold.”

It’s worth noting that the Minutes of the July Federal Open Market Committee (FOMC) meeting also exerted downside pressure on the market sentiment and favored the US Dollar Index (DXY) to trim the early Wednesday’s losses. The FOMC minutes shed the rate hike concerns, despite supporting the tapering, while also conveying the dissatisfaction of employment recovery among the policymakers.

Talking about data, Canada Consumer Price Index (CPI) for July jumped beyond 3.4% YoY forecast and 3.1% prior to 3.7% whereas the BOC CPI crossed 2.7% previous and 2.8% market consensus to 3.3%. On the other hand, the US housing numbers portrayed a mixed scenario as a drop in US Housing Starts contrasted the upbeat Building Permits for July.

Amid these plays, Wall Street closed in the red and the US 10-year Treasury yields were sluggish. That said, S&P 500 Futures print mild losses by the press time whereas the WTI remains pressured near a multi-day low despite printing intraday gains around $64.50.

Looking forward, weekly prints of US Jobless Claims and monthly Philadelphia Fed Manufacturing Survey for August will join second-tier employment figures from Canada to entertain USD/CAD traders. However, major attention will be given to the risk catalysts for fresh impulse.

Technical analysis

With sustained trading beyond the 200-DMA level of 1.2555, USD/CAD prices are on their way to March 2021 top surrounding 1.2740.